It has been about a month since the last earnings report for InterDigital (
IDCC Quick Quote IDCC - Free Report) . Shares have added about 0.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is InterDigital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
InterDigital Q4 Loss Wider Than Expected on Top-Line Woes InterDigital reported sedate fourth-quarter 2020 results owing to coronavirus-induced adversities with wider-than-expected loss. Nevertheless, new licensing avenues highlighted the operating leverage of the company’s business model and reflected the strength of its licensing business. Bottom Line
The company reported net loss of $1.3 million or loss of 4 cents per share against net income of $13.7 million or 44 cents per share in the year-ago quarter. The year-over-year decline was largely attributable to top-line contraction and high operating expenses in the reported quarter. Also, the bottom line was wider than the Zacks Consensus Estimate of a loss of 3 cents per share. In full-year 2020, net income improved to $44.8 million or $1.44 per share from $20.9 million or 66 cents per share in 2019.
The wireless R&D company’s quarterly revenues totaled $90.8 million, down from $102.2 million in the year-earlier quarter largely due to continued challenging macroeconomic environment triggered by the pandemic. However, the top line surpassed the Zacks Consensus Estimate of $88 million. In full-year 2020, total revenues aggregated $359 million compared with $318.9 million in 2019.
Recurring revenues during the reported quarter were $89.1 million compared with $77.5 million a year ago driven by six new patent license agreements signed during the year. While total revenues from patent royalties came in at $87.2 million, the same from current technology solutions aggregated $3 million. Other Details
Total operating expenses were $87.7 million, up from $76.9 million in the prior-year quarter due to intellectual property enforcement and non-patent litigation costs. Operating income declined to $3.1 million from $25.3 million, due to lower revenues and higher operating expenses in the reported quarter.
Cash Flow and Liquidity
In 2020, InterDigital generated $163.5 million of cash from operating activities compared with $89.4 million a year ago. Free cash flow in 2020 was $121.1 million, up from $51.4 million. As of Dec 31, 2020, the company had $926.6 million in cash and short-term investments along with $415.9 million of long-term debt and other liabilities compared with respective tallies of $924.7 million and $396.6 million in the year-ago period.
Banking on solid licensing agreements with leading consumer electronics customers, InterDigital is eyeing a healthy licensing business despite the coronavirus-induced pandemonium. The company expects the licensing momentum to continue in 2021 driven by diligent execution of operational plans. InterDigital also remains poised to gain from growth opportunities from the 5G rollout.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -60.61% due to these changes.
At this time, InterDigital has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise InterDigital has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.